This third edition of Fixed Income Markets and Their Derivatives is a substantially
revised edition, refl ecting the feedback I have received from the users of the previous
editions.
The book is now organized into four parts. Part 1 (Institutions and Conventions)
contains an overview of fi xed income markets, a description of market conventions,
and a thorough description of essential institutions such as repo markets, the Fed,
the Treasury, and dealer market structure. These discussions are presented in a way
such that the reader can grasp the basics without having a mathematical background.
A complete understanding of these institutions is critical to a successful career in
fi xed income markets.
Part 2 (Analytics of Fixed Income Markets) contains the analytical underpinning
of fi xed income markets. This part develops concepts such as duration, convexity,
zero extraction, interest rate models, credit risk models, and the like. This part
requires a basic mathematical background, and all the concepts are presented using
Microsoft Excel spreadsheets. Most of the material developed in Part 2 should be
accessible to seniors in undergraduate programs who intend to pursue careers in
fi xed income markets.
Part 3 of the book (Some Fixed Income Market Segments) provides a concise
account of mortgages, mortgage-backed securities, and Treasury infl ation-protected
securities markets.
Part 4 (Fixed Income Derivatives) provides a detailed treatment of fi xed income
derivatives, including overnight index swaps, Eurodollar futures, interest rate swaps,
credit default swaps, and structured credit products.
This current edition has numerous worked-out examples and Excel applications
to illustrate diffi cult concepts with concrete examples. Most of the examples are set
in a real-life context, with actual market prices and historical data from fi xed income
markets. The book also contains a detailed fi nancial glossary that provides an explanation
of the key fi nancial terms used in the book. Some of the recent developments
in fi xed income markets (such as credit default swaps and collateralized debt obligations)
are analyzed and presented in a readily accessible fashion. The book also contains
an integrated discussion of the 2007 – 2008 credit crisis and its implications.
For faculty who use the book in an academic course, instructor resources are
available by registering at http://textbooks.elsevier.com. These resources include
fully worked-out examples for each chapter and useful links that contain data and
research pertaining to fi xed income markets.
Suresh Sundaresan